Rewarding teamwork in a lone-wolf world
Our country has a proud and long-standing history of honoring the individual. Not surprising, given that it was founded upon the principles of individual freedom and rights. Individualism has crept into many facets of our lives and culture, including the ways we manage, measure and pay people.
But organizational life has changed. Our companies are no longer stand-alone, hierarchical entities. They are built on layer of connections. On the outside, they are part of a bigger web of partnerships, networks, strategic alliances and outsourcing relationships. On the inside, they are increasingly made up of ad-hoc committees, project teams and matrix relationships.
Organizational structures are becoming more fluid and flexible, as companies position themselves to adapt and innovate in today’s world. Responding effectively to the overwhelming amounts of information and ever-shortening response times in business today requires groups of people who can bring diverse backgrounds, skills and perspectives to the table. As a result, collaboration- the act of working together-has become a key competency for today’s growing business.
But while collaboration has emerged as a critical capability for business success and survival, far too many companies rely on compensation approaches that only recognize the efforts and accomplishments of the lone individual. There is nothing fundamentally flawed about individual reward. The problem arises when the scale is completely tipped toward individual performance with no recognition of group results.
Money talks
Companies full of rhetoric about teamwork and cooperation send conflicting messages when they talk collaboration but reward only individual achievements. All things being equal, money talks. Most of us pay greater attention to the messages that are directly wired to our paychecks.
Today’s growing companies must develop a clear understanding of the kind of culture, values and behaviors that will drive their success. If collaboration promises to be an important facet of how your business will compete and prosper, then your compensation package should include at least one group-level component.
Group can mean team, department or the whole company, depending on your situation and needs. When in doubt, go broad. Identifying and rewarding groups that are too narrow in function and focus can produce competitive, fragmented, silo-like behavior even in smaller organizations. That’s not a recipe for success.
Group rewards can take a variety of forms, but essentially fall into two categories: group incentive plans and group recognition plans.
Group Incentive Plans
Group incentive plans are compensation plans whose payment are contingent upon some pre-announced measure or measures of group performance, and are not added to base pay. Group incentives are sometimes referred to as variable pay, gainsharing, success sharing and performance sharing plans.
At its simplest, designing a group incentive plan involves identifying appropriate measures of success, setting a target level of performance (what we believe we can accomplish) and establishing a payout amount that will be awarded if target performance is achieved.
Important points to consider:
Promote balance in performance measures. Basing an incentive on one type of measure alone can have unintended consequences. For example, offering incentives to employees solely on the basis of financial performance (boosting revenue or cutting costs) could cut customer service or product quality.
Less is more. Ideally, an incentive plan will have 2 to 4 measures, not 12 to 14. Effective group incentive plans communicate company priorities. They focus employee attention and effort on the top drivers of business success.
Be aware of line of sight. Tying employees’ compensation to a performance indicator they do not understand or do not believe they can achieve will only produce frustration. Communicate and offer training efforts, such as sessions aimed at improving employee awareness of how the company creates value.
Group Recognition Plans
Group recognition plans deliver rewards after the fact to reinforce and celebrate desired group outcomes. Recognition awards can be cash or non-cash, but are typically much smaller in economic value than incentive awards. Because of this, recognition programs have a well-deserved reputation for being cost effective; they can accomplish a lot on a small budget.
For example, one company created a group recognition program to reward new sales. Whenever the firm signed a contract with a new client, the president would make a voicemail announcement giving the details of the sale and a selected date for a celebratory fruit-and-bagel breakfast for the employees. It reinforced the idea that every employee plays a role in bringing new clients to the firm. Other popular group recognition awards include pizza lunches, free tickets to concerts or sports events, and extended lunch hours or afternoons off.
Limited shelf life
Criteria for making a group recognition program successful include the following:
- Novelty. One way that recognition programs are able to accomplish so much for so little is through the element of surprise. For this reason, even the most innovative recognition programs have a limited shelf life.
- Alignment. Recognition programs send powerful messages about our company’s values and standards. They create heroes and role models. It is critical, therefore, that these programs reinforce behaviors and outcomes that are aligned with business strategy and objectives.
- Clear accountability. Effective recognition programs have specific award standards. Supervisors and managers must understand the purpose and objectives of the program and be held accountable. This may require a greater communication and monitoring effort than simply establishing a recognition budget.
Think about the skills, behaviors and values that your organization will need for success and growth. If working effectively together is emerging as a critical competency in your business, it may be time to bring a better sense of balance to the way you compensate your people by ensuring that collaboration, as well as individual efforts, are rewarded.
[Contact] Ann Bares is a consulting manager with RSM McGladrey in Minneapolis, a management-consulting firm. She has more than 15 years of HR consulting experience in compensation and performance management: 612-376-9211; ann.bares@rsmi.com
